The impact of egg price stabilization in Kenya

Abstract

Major causes of egg price instability in Kenya and the impact of the instability on egg production and consumption were investigated. The direct impacts of various stabilization programmes in terms of stability of egg prices, production and producer revenue, and the benefits accruing to producers and consumers and the associated costs to the government of those programmes were evaluated. Supply, per capita demand, and egg farm-to-retail price linkage functions were specified and estimated for the period 1977 to 1988 using ordinary least squares (OLS). The estimated equations were combined to form a multi-equation model of the Kenyan egg sector. The multi-equation model was then used to simulate the effects of four price stabilization programmes, each of which consisted of implementing a proposed deficiency payment policy. Deficiency payment programmes reduced price instability in the Kenyan egg industry, and led to gains in both producer and consumer welfare but at a cost to the government and a dead weight loss to the economy. Programmes based on net margins rather than price were more effective at reducing price instability, generated more welfare gains to both producers and consumers, but at higher government costs.